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Essays on credit markets and banking
Umeå universitet, Samhällsvetenskapliga fakulteten, Handelshögskolan vid Umeå universitet, Nationalekonomi.
2012 (engelsk)Doktoravhandling, med artikler (Annet vitenskapelig)
Abstract [en]

This thesis consists of four self-contained papers related to banking, credit markets and financial stability.   

Paper [I] presents a credit market model and finds, using an agent based modeling approach, that credit crunches have a tendency to occur; even when credit markets are almost entirely transparent in the absence of external shocks. We find evidence supporting the asset deterioration hypothesis and results that emphasize the importance of accurate firm quality estimates. In addition, we find that an increase in the debt’s time to maturity, homogenous expected default rates and a conservative lending approach, reduces the probability of a credit crunch. Thus, our results suggest some up till now partially overlooked components contributing to the financial stability of an economy.    

Paper [II] derives an econometric disequilibrium model for time series data. This is done by error correcting the supply of some good. The model separates between a continuously clearing market and a clearing market in the long-run such that we are able to obtain a novel test of clearing markets. We apply the model to the Swedish market for short-term business loans, and find that this market is characterized by a long-run nonmarket clearing equilibrium.   

Paper [III] studies the risk-return profile of centralized and decentralized banks. We address the conditions that favor a particular lending regime while acknowledging the effects on lending and returns caused by the course of the business cycle. To analyze these issues, we develop a model which incorporates two stylized facts; (i) banks in which lendingdecisions are decentralized tend to have a lower cost associated with screening potential borrowers and (ii) decentralized decision-making may generate inefficient outcomes because of lack of coordination. Simulations are used to compare the two banking regimes. Among the results, it is found that even though a bank group where decisions are decentralizedmay end up with a portfolio of loans which is (relatively) poorly diversified between regions, the ability to effectively screen potential borrowers may nevertheless give a decentralized bank a lower overall risk in the lending portfolio than when decisions are centralized.   

In Paper [IV], we argue that the practice used in the valuation of a portfolio of assets is important for the calculation of the Value at Risk. In particular, a seller seeking to liquidate a large portfolio may not face horizontal demand curves. We propose a partially new approach for incorporating this fact in the Value at Risk and Expected Shortfall measures and in an empirical illustration, we compare it to a competing approach. We find substantial differences.

sted, utgiver, år, opplag, sider
Umeå: Umeå University , 2012. , s. 16
Serie
Umeå economic studies, ISSN 0348-1018 ; 840
Emneord [en]
financial stability, credit market, banking, agent based model, simulations, disequilibrium, clearing market, business cycle, risk, organization
HSV kategori
Forskningsprogram
ekonometri; nationalekonomi
Identifikatorer
URN: urn:nbn:se:umu:diva-53494ISBN: 978-91-7459-384-6 (tryckt)OAI: oai:DiVA.org:umu-53494DiVA, id: diva2:512726
Disputas
2012-05-04, Samhällsvetarhuset, Hörsal D, Umeå Universitet, Umeå, 10:15 (engelsk)
Opponent
Veileder
Tilgjengelig fra: 2012-03-30 Laget: 2012-03-28 Sist oppdatert: 2018-06-08bibliografisk kontrollert
Delarbeid
1. The Credit Market and the Determinants of CreditCrunches: An Agent Based Modeling Approach
Åpne denne publikasjonen i ny fane eller vindu >>The Credit Market and the Determinants of CreditCrunches: An Agent Based Modeling Approach
(engelsk)Manuskript (preprint) (Annet vitenskapelig)
Abstract [en]

This paper presents a credit market model and finds, using an agent based modeling approach, that credit crunches have a tendency to occur; even when credit markets are almost entirely transparent in the absence of external shocks. We find evidence supporting the asset deterioration hypothesis and results that emphasize the importance of accurate firm quality estimates. In addition, we find that an increase in the debt’s time to maturity, homogenous expected default rates and a conservative lending approach, reduces the probability of a credit crunch. Thus, our results suggest some up till now partially overlooked components contributing to the financial stability of an economy.

Emneord
financial stability, banking, lending, screening, truncation
HSV kategori
Forskningsprogram
nationalekonomi
Identifikatorer
urn:nbn:se:umu:diva-53489 (URN)
Tilgjengelig fra: 2012-03-28 Laget: 2012-03-28 Sist oppdatert: 2018-06-08
2. Error Corrected Disequilibrium
Åpne denne publikasjonen i ny fane eller vindu >>Error Corrected Disequilibrium
(engelsk)Manuskript (preprint) (Annet vitenskapelig)
Abstract [en]

We derive an econometric disequilibrium model for time series data. This is done by error correcting the supply of some good. The model naturally separates between a continuously clearing market and a clearing market in the long-run such that we are able to obtain a novel test of clearing markets. We apply the model to the Swedish market for short-term business loans, and find that this market is characterized by a long-run non-market clearing equilibrium.

Emneord
disequilibrium econometrics, error correction, clearing market, interest rates, credit market
HSV kategori
Forskningsprogram
ekonometri
Identifikatorer
urn:nbn:se:umu:diva-53490 (URN)
Tilgjengelig fra: 2012-03-28 Laget: 2012-03-28 Sist oppdatert: 2018-06-08
3. Comparing Centralized and Decentralized Banking: A Study of the Risk-Return Profiles of Banks
Åpne denne publikasjonen i ny fane eller vindu >>Comparing Centralized and Decentralized Banking: A Study of the Risk-Return Profiles of Banks
(engelsk)Manuskript (preprint) (Annet vitenskapelig)
Abstract [en]

This paper studies the risk-return profile of centralized and decentralized banks. We address the conditions that favor a particular lending regime while acknowledging the effects on lending and returns caused by the course of the business cycle. To analyze these issues, we develop a model which incorporates two stylized facts; (i) banks in which lending decisions are decentralized tend to have a lower cost associated with screening potential borrowers and (ii) decentralized decision-making may generate inefficient outcomes because of lack of coordination. Simulations are used to compare the two banking regimes. Among the results, it is found that asymmetric markets (in terms of the proportion of high ability entrepreneurs) tend to favor centralized banking while decentralized banks seem better at lending in the wake of an economic downturn (high probability of a recession). In addition, we find that even though a bank group where decisions are decentralized may end up with a portfolio of loans which is (relatively) poorly diversified between regions, the ability to effectively screen potential borrowers may nevertheless give a decentralized bank a lower overall risk in the lending portfolio than when decisions are centralized.

Emneord
lending, screening, business cycle, portfolio diversification, risk, organization, simulations
HSV kategori
Forskningsprogram
nationalekonomi
Identifikatorer
urn:nbn:se:umu:diva-53493 (URN)
Tilgjengelig fra: 2012-03-28 Laget: 2012-03-28 Sist oppdatert: 2018-06-08
4. Value at risk for large portfolios
Åpne denne publikasjonen i ny fane eller vindu >>Value at risk for large portfolios
2011 (engelsk)Inngår i: Finance Research Letters, ISSN 1544-6123, E-ISSN 1544-6131, Vol. 8, nr 2, s. 18s. 59-68Artikkel i tidsskrift (Fagfellevurdert) Published
Abstract [en]

We argue that the practise used in the valuation of the portfolio is important for the calculation of the Value at Risk. In particular, when liquidating a large portfolio the seller may not face horizontal demand curves. We propose a partially new approach for incorporating this fact in the Value at Risk and in an empirical illustration we compare it to a competing approach. We find substantial differences.

sted, utgiver, år, opplag, sider
Elsevier, 2011. s. 18
Emneord
Demand, Supply, Liquidity Risk, Limit Order Book, Bank, Sweden
HSV kategori
Forskningsprogram
ekonometri
Identifikatorer
urn:nbn:se:umu:diva-22199 (URN)10.1016/j.frl.2010.10.002 (DOI)2-s2.0-79956069952 (Scopus ID)
Utgiver:
Institutionen för nationalekonomi, 90187, Umeå
Tilgjengelig fra: 2009-04-28 Laget: 2009-04-27 Sist oppdatert: 2023-03-23bibliografisk kontrollert

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